Storm clouds thicken ahead of economic summit

Oil, food prices top agenda; group faces expansion pressure

Oil, food prices top agenda; group faces expansion pressure

July 05, 2008

SAPPORO, Japan (AP) - Between surging oil prices, food inflation and a credit crunch that's depressed global growth, leaders from the Group of Eight economic powers face the gravest combination of economic woes in at least a decade when they gather next week. The outlook has darkened dramatically since last year's summit in Germany, when the leaders declared the global economy was in “good condition” and oil cost $70 a barrel - which seemed high at the time. Since then, the U.S. subprime mortgage crisis has erupted, roiling markets and battering major financial firms. Oil has doubled to above $140 and food prices have jumped, hurting the poor in particular and raising the threat of political instability. Host Japan had put global warming at the top of the summit's agenda, but the dilemma of how to respond to accelerating inflation and slowing global economic growth could grab the spotlight. Prime Minister Yasuo Fukuda has said he hopes the meeting Monday through Wednesday at a hot springs resort in Hokkaido, Japan's northern island, will “show some direction” in tackling oil and food prices but stressed it was only “one step” in a longer process. Soaring crude prices have already forced India, Malaysia, and Indonesia to cut subsidies and raise state-set prices on gasoline and other fuels. Last month, China hiked fuel prices as much as 18 percent. At the same time, prices of corn, wheat, rice and soybeans and other farm goods have surged due to changing diets, urbanization, expanding populations, extreme weather, growth in biofuel production and speculation. Spiraling fuel and food costs could drive millions into poverty, the Asian Development Bank has warned. In India, inflation has jumped to a 13-year high of 11.4 percent. On the food front, the G-8 leaders may announce an aid package or pledging agricultural investment in poorer countries, experts say. The summits were originally meant to focus on economic issues, but the agenda has expanded to include terrorism, Africa's development and the environment. The group's membership also has grown from six to eight, adding Russia in 1997. But many argue that it should be expanded to include China, the world's fourth-largest economy, and other emerging powerhouses like India and Brazil - especially to tackle global issues like energy and climate change. Already, the G-8 has been reaching out. It plans meetings with African leaders on the summit's first day, and later with leaders from China, India, Mexico, Brazil and South Africa - countries that someday might be a part of the Group of 13.